Correlation Between INKON Life and Zhejiang Construction

Can any of the company-specific risk be diversified away by investing in both INKON Life and Zhejiang Construction at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining INKON Life and Zhejiang Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between INKON Life Technology and Zhejiang Construction Investment, you can compare the effects of market volatilities on INKON Life and Zhejiang Construction and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in INKON Life with a short position of Zhejiang Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of INKON Life and Zhejiang Construction.

Diversification Opportunities for INKON Life and Zhejiang Construction

0.64

Correlation Coefficient

INKON Life  Zhejiang Construction

Poor diversification

The 3 months correlation between INKON and Zhejiang is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding INKON Life Technology and Zhejiang Construction Investme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Construction and INKON Life is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on INKON Life Technology are associated (or correlated) with Zhejiang Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Construction has no effect on the direction of INKON Life i.e., INKON Life and Zhejiang Construction go up and down completely randomly.

Pair Corralation between INKON Life and Zhejiang Construction

Assuming the 90 days trading horizon INKON Life Technology is expected to under-perform the Zhejiang Construction. But the stock apears to be less risky and, when comparing its historical volatility, INKON Life Technology is 1.66 times less risky than Zhejiang Construction. The stock trades about -0.08 of its potential returns per unit of risk. The Zhejiang Construction Investment is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  886.00  in Zhejiang Construction Investment on September 25, 2024 and sell it today you would earn a total of  42.00  from holding Zhejiang Construction Investment or generate 4.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

INKON Life Technology  vs.  Zhejiang Construction Investme

INKON Life Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INKON Life Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, INKON Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Zhejiang Construction

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Construction Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Construction sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INKON Life and Zhejiang Construction

The main advantage of trading using opposite INKON Life and Zhejiang Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INKON Life position performs unexpectedly, Zhejiang Construction can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zhejiang Construction will offset losses from the drop in Zhejiang Construction's long position.

The idea behind INKON Life Technology and Zhejiang Construction Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.